Seneca Global Income & Growth Trust generated a net asset value total return for the year ended 30 April 2016, of +0.8% which was less than the benchmark return of +3.7%, being 3-month LIBOR plus 3%. Nevertheless, SIGT’s NAV performance over the year compared well with its AIC sector and most of the comparator indices, whose returns were: AIC Global Equity Income sector -2.3%, FTSE All-Share Index -5.5%, FTSE All-World ex-UK Index +0.6%, FTSE WMA Stock Market Balanced Index -1.0%, and FTSE Gilts All-Stocks Index +4.3%. Over a longer time frame of three years, SIGT generated a NAV total return of +18.4% compared with +11.2% from the benchmark. This helped attract new investors and drive down the discount resulting in a return to shareholders for the year ended 30 April 2016 of 9.3%.
Seneca Global Income & Growth paid a fourth interim dividend of 1.52 pence per share on 10 June 2016, which, when added to the three preceding interim dividends, produced total dividends of 5.93 pence per share for the year ended 30 April 2016, an increase of 4.6% on the previous year’s 5.67 pence. It is the Board’s intention, barring unforeseen circumstances, to at least maintain the quarterly dividend amount of 1.52 pence per share for the year to 30 April 2017.
The Board believes the time is right to adopt a Discount Control Mechanism (‘DCM’) which will seek to regulate the share price at very close to its net asset value, and provide improved liquidity in the company’s shares. The DCM will seek to ensure that your Company’s shares trade very close to net asset value through a combination of share buy-backs at a small discount to net asset value when supply exceeds demand and the issue of new shares at a small premium to net asset value when demand exceeds supply. The Board’s expectation is that, over time, this should lead to the expansion of the company and in turn reduce the Ongoing Charges ratio by spreading the fixed costs over a larger base.
The performance of the UK equity holdings, which are largely directly held (rather than through third party funds) and focussed on mid-sized FTSE 250 companies, made the most significant contribution. The 7.1% return achieved by the UK portfolio was close to 15% ahead of the UK equity index used internally. The largest contribution came from Amlin, which was bid for, and subsequently acquired by Mitsui Sumitomo Insurance. Ashmore Group made an early (and welcome) contribution, as the position was only introduced to the portfolio in January. Another early contributor was Royal Dutch Shell, which was also bought in January, when the shares were offering a yield of over 10%. The shares subsequently rose by over 30%, finishing the period with a healthy uplift over the original purchase price. The long held position in A J Bell holdings was a positive contributor to returns, as the carried value of this unquoted investment was increased from 575p to 600p following a partial sale of the holding in May 2015 at 600p per share.
The major detractors from returns have been largely those UK direct investments which have links to lower commodity prices and poor investor sentiment towards emerging markets. The Trust’s holding in Aberdeen Asset Management was sold to finance the acquisition of the Ashmore Group position mentioned above, as they looked to invest in a company with a purer exposure to out of favour emerging markets. The negative contributions from the two European equity funds were due, in part, to the fact that the investments were made in sterling hedged share classes and thus did not benefit from the strength in the euro against sterling in the early part of the year. The decision to invest in funds hedged against euro weakness was one they took late in 2014. They continue to believe that the euro is likely to be a weaker currency going forward and they still wish to protect SIGT investors from any such weakness.
SIGT : Seneca Global Income and Growth beats peer group average in difficult year